Lifetime Gifts
There is generally no Inheritance Tax to pay on an outright gift you make more than seven years before you die.
If you make an outright gift and die within seven years then the person who received the gift may have to pay Inheritance Tax on the amount of the gift, but normally only if the total value of gifts exceed £325,000.
If the gift was made more than 3 years but less than seven years before death then the tax on the gift will be reduced by taper relief.
Lifetime Planning
Clawback of relief
In the case of lifetime gifts, which are potentially exempt transfers, an occasion of charge to inheritance tax only arises if the donor dies within seven years of making the transfer. If this occurs relief is only given if the doneé has retained the asset throughout the period from the date of the gift to the date of death of the donor and it continues to qualify as business property. Relief is also given where the doneé has replaced the original asset gifted with other business property.
GENERAL INHERITANCE TAX EXEMPTIONS
The following are the principal Inheritance Tax Exemptions:
Wedding Gifts
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Wedding gifts of up to £5,000 to each child from their parents (including stepchildren and adopted children)
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Wedding Gifts to the bride or the groom from the parents in law
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Wedding gifts up to £2,500 to each grandchild or the person that your grandchild is marrying
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Wedding gifts of up to £1,000 to anyone else
Annual Gifts Allowance
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Gifts up to a value of £3,000 in any one tax year, plus any unused balance of £3,000 from the previous tax year
General Gift Allowance
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Outright gifts in any one tax year up to a total of £250 each to any number of people, but only if the total number of gifts made to the recipient in the same tax year do not exceed £250.
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Note:
You can make gifts under more than one of the above headings to the same person and they will generally be free of Inheritance Tax
Gifts To Charities And Political Parties
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Gifts to registered charities and the main political parties are exempt from inheritance tax
Gifts Out Of Annual Expenditure
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Regular gifts out of excess income, which have a pattern to them, and does not diminish the capital, of effect the lifestyle of the donor, may be exempt from inheritance tax.
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It is recommended that the intention to make gifts regularly is documented in advance, and payments made regularly.
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